[EL] IRS denial of 501(c)(4) status show broad definition of political activity

[Sean Parnell]

Well, if the IRS had focused their scrutiny on groups that had engaged in
speech in response to the demands of officeholders, that would still be a
pretty big scandal in my book - as a rule, I'm not in favor of
politically-motivated enforcement or investigations. 

 

I'm also not a fan of the 'a few bad apples' defense you seem to be raising
(although not necessarily advocating yourself), since it seems to suggest
that it's somehow the fault of Crossroads GPS that the IRS went after the
Waco Tea Party. It's not the fault of Crossroads GPS, it's the fault of (as
near I can tell) several high-ranking IRS officials responding to the cues
and public demands of certain public officials.

 

Sean Parnell

President

Impact Policy Management, LLC

6411 Caleb Court

Alexandria, VA  22315

571-289-1374 (c)

sean at impactpolicymanagement.com

 

From: Beckel, Michael [mailto:mbeckel at publicintegrity.org] 
Sent: Friday, June 20, 2014 10:19 AM
To: Sean Parnell; 'John Pomeranz'; 'law-election at UCI.edu'
Subject: RE: [EL] IRS denial of 501(c)(4) status show broad definition of
political activity

 

That's a good point, Sean. However, it seems to me that a portion of the
outrage is not only directed at the IRS for going after smaller
organizations but for also, apparently, going after the larger ones. (The
issue of whether Crossroads GPS, for instance, should have 501(c)(4) status,
if I recall correctly, has not yet been resolved by the agency, although
this ProPublica article
<http://www.rawstory.com/rs/2014/04/10/irs-planned-to-crack-down-on-karl-rov
es-crossroads-gps-before-scandal-blew-up/>  suggested that the IRS was close
to rejecting its 501c4 application before the targeting scandal blew up.) 

 

And just earlier this month, the Center for Competitive Politics filed a
complaint with the U.S. Senate Select Committee on Ethics calling for an
investigation of nine Democratic senators who raised questions with the IRS
about certain high-profile/big-spending groups organized as 501c4s.

 

If the IRS had only focused extra scrutiny on groups that had already
conducted actual activities, how much of a scandal would that have been? Did
a few bad apples, so to speak, spoil the bushel for the rest of the groups?

 

Regards,

Michael Beckel

 

 

From: Sean Parnell [mailto:sean at impactpolicymanagement.com] 
Sent: Thursday, June 19, 2014 6:46 PM
To: Beckel, Michael; 'John Pomeranz'; 'law-election at UCI.edu'
Subject: RE: [EL] IRS denial of 501(c)(4) status show broad definition of
political activity

 

I'm not sure what the connection to Lois Lerner's activities is, since it
appears this letter was sent after consideration of the actual activities
undertaken by a c4 whereas it appears that for the most part, the targeting
of conservative groups focused on organizations that had yet to spend much
on anything. There's a big difference, at least to me, between looking at
what someone has done and then assessing that in light of current law, and
looking trying to peer into that Great Magic 8 Ball that Lerner and friends
were apparently using to discern whether some group might in the future
cross the line.

 

Sean Parnell

President

Impact Policy Management, LLC

6411 Caleb Court

Alexandria, VA  22315

571-289-1374 (c)

sean at impactpolicymanagement.com

 

From: law-election-bounces at department-lists.uci.edu
[mailto:law-election-bounces at department-lists.uci.edu] On Behalf Of Beckel,
Michael
Sent: Thursday, June 19, 2014 6:08 PM
To: John Pomeranz; law-election at UCI.edu
Subject: Re: [EL] IRS denial of 501(c)(4) status show broad definition of
political activity

 

For any interested parties: the organization in question here was the
pro-Blanche Lincoln group "Arkansans for Common Sense."

 

In 2010, it spent $1,287,624, according to its annual Form 990 tax return.
It reported spending $637,817 as political campaign activity on Schedule C
of its 990 (and the same about as "independent expenditures" to the FEC).
That amounted to 49.53 percent of its spending in 2010.

 

Folks may also find interesting that the agency's initial rejection letter
to Arkansans for Common Sense was dated May 7, 2013 - just three days before
IRS official Lois Lerner acknowledged the targeting of applications from
political advocacy groups for 501(c)(4) status. 

 

Full story here:

www.publicintegrity.org/2014/06/19/14974/irs-says-liberal-group-too-politica
l-social-welfare-status

 

Regards,

Michael Beckel

Center for Public Integrity

 

From: law-election-bounces at department-lists.uci.edu
[mailto:law-election-bounces at department-lists.uci.edu] On Behalf Of John
Pomeranz
Sent: Thursday, June 19, 2014 11:18 AM
To: law-election at UCI.edu
Subject: [EL] IRS denial of 501(c)(4) status show broad definition of
political activity

 

The IRS recently released this (redacted) letter denying an organization
<http://www.irs.gov/pub/irs-wd/201424028.pdf> 's requested tax exemption
under section 501(c)(4) of the Internal Revenue Code.  The agency found that
the organization's political efforts were too great a portion of its overall
work for the organization to be considered "primarily" engaged in "social
welfare activities," which the IRS defines as not including political
activities. 

 

This ruling does a very good job of demonstrating that the current IRS
standard for what constitutes political activity is substantially broader
than the scope of political activity that is subject to campaign finance law
limits under the First Amendment.  Even communications that don't include
express advocacy for or against a candidate may be deemed political under
the IRS standard.  For example, an organization that highlights its
disagreement with a candidate's position on a policy issue could be found to
have attempted to intervene in the election.  Unfortunately, there are not
any clear rules for what is and isn't political activity for tax purposes.
Instead, the IRS evaluates each instance based on a review of "all the
relevant facts and circumstances."  

 

The longstanding problems with this vague standard were demonstrated in a
powerful way with the revelations that emerged from the IRS scandal that
erupted last spring and continue today.  The current attempt to write rules
defining political activities <http://www.regulations.gov/> , at least for
501(c)(4)s and maybe other tax-exempt organizations, is a response to
confusion both among nonprofits and within the IRS itself about when an
organization is engaged in politicking.  Treasury and the IRS have promised
to revisit the first draft of those rules - widely criticized in the more
the 160,000 comments received - and to come out with a new draft for comment
in early 2015.  I and others are urging the agency to adopt something like
the Bright Lines Project
<http://www.citizen.org/documents/May%208%20Explanation%20with%20Exhibit.pdf
>  proposal that we've worked on, which seeks to provide needed clarity
while recognizing that a broader definition of political activity is
appropriate in the context of determining which organizations qualify for
tax-law subsidies.  Others (many on this list) are urging a narrower
definition.  (CCP
<http://www.regulations.gov/contentStreamer?objectId=0900006481595225&dispos
ition=attachment&contentType=pdf> , for example, just to spare Steve or Brad
or Barnaby from having to dig up the link.)

 

In the meantime, anyone confused about the current IRS standard would do
well to read the denial letter above.  (And a hat tip to Paul Streckfus and
his Exempt Organizations Tax Journal for flagging the denial for me.)

 

 

John Pomeranz

Harmon, Curran, Spielberg & Eisenberg, LLP

1726 M Street, NW, Suite 600

Washington, DC  20036

office: 202.328.3500

fax: 202.328.6918

e: jpomeranz at harmoncurran.com 

 

 

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